Court Upholds Award For Travelers In Lawsuit

A New York appellate court has affirmed a $420.4 million ruling in favor of The Travelers Companies, which is, of course, a large insurer. This ends one of the longest-running and most complex asbestos-related litigations in history. The dispute has to do with the obligations of certain reinsurers to Travelers, which joined in payments of nearly $1 billion to cover asbestosclaims against Western MacArthur. Travelers subsequently sought to recover some of its payments from its reinsurance companies.

Among those reinsurers is the U.S. unit of industry leader Munich Re and units of the insurer and reinsurer ACE Ltd. In October 2010, a lower New York court ruled that the reinsurers were obliged to help cover Travelers. That ruling was affirmed on appeal by the appellate division of New York Supreme Court. The court ruled that the reinsurance companies were bound by a concept known as the “follow the fortunes doctrine,” which holds that reinsurers share the burdens taken on by the insurance companies with which they do business.

The appellate court found that the lower court “correctly determined that the follow-the-fortunes doctrine required Defendants to accept the reinsurance presentation made by (Travelers unit) USF&G.” The events giving rise to this case started in 1948, when USF&G first wrote a liability insurance policy for Western Asbestos Co. By the late 1970s, victims harmed by asbestos began to sue Western Asbestos’ successor company, Western MacArthur. In turn, in 1993 Western Asbestos sued USF&G and two other insurers seeking indemnification.

In 2002, the parties reached a settlement, which resulted in Western MacArthur going into bankruptcy. USF&G then sought indemnification from its reinsurers. Travelers was represented on the appeal by Simpson Thacher & Bartlett, a New York law firm, and they did a very good job in this complicated matter.